AICPA CPA-Business Exam - Topic 1 Question 84 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 84
Topic #: 1

For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is $1.74. What is the lease's after-tax present value using a 10% discount factor?

A$2,610

B$4,350

C$9,570

D$11,310

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.

by Cecilia at Apr 10, 2024, 06:17 AM

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Nan

7 months ago

Totally agree, the tax basis amortization is key here!

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Kayleigh

8 months ago

Wait, how does that $1.74 factor in? Seems off.

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Edna

8 months ago

After tax, it’s more like $4,350, right?

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Mirta

8 months ago

I think the tax impact really changes the numbers.

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Lashawn

8 months ago

The cash inflow is $7,500 before tax adjustments.

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Shonda

9 months ago

I think the present value factor we need is 1.74, but I'm unsure how to apply it correctly to find the after-tax value.

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Krissy

9 months ago

I feel a bit lost on how to handle the amortization part. Does it reduce the cash inflow before tax or after?

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Billye

9 months ago

This question seems similar to the practice problems we did on present value calculations. I think I need to adjust for tax first before applying the discount factor.

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Yuette

9 months ago

I remember we calculated after-tax cash flows in class, but I'm not sure if I got the tax impact right here.

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Carey

9 months ago

This is right up my alley! I love these types of present value problems. I'm confident I can work through this systematically and arrive at the correct answer.

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Arleen

9 months ago

Okay, I think I've got this. I just need to calculate the after-tax cash inflows, find the present value of the annuity, and then apply the discount factor. Shouldn't be too bad if I stay focused.

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German

9 months ago

Hmm, I'm a bit confused by all the details in this question. I'll need to take it step-by-step to make sure I understand the cash flows and discounting properly.

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Javier

9 months ago

This looks like a tricky present value calculation involving a lease and tax considerations. I'll need to carefully break down the information and apply the appropriate formulas.

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Justine

9 months ago

This looks like a straightforward security question. I think the key is to identify the security mechanism that can provide centralized security measures across all services.

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Rosita

9 months ago

Hmm, I'm not completely sure about this one. I'll have to think it through carefully.

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Talia

9 months ago

Hmm, I'm a bit unsure about this one. The question mentions "personal workflows", so I'm not sure if that rules out something like Excel or Teams. I'll need to think carefully about the specific capabilities of each product to determine the best options.

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Ruthann

10 months ago

Regarding Windows and IIS, I remember that using an extension like 'F5XForwardedFor' helps fetch the real IP, but I wonder if there are any other setups required.

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